It’s a great time to rent out your home.
- Rents are (in many areas) at an all-time high – and keep moving higher.
- Find the right tenant – so you make money while you sleep.
- Have a new house payment? Then why not let someone else help pay for it?
There are times when you are looking for a new home, yet need to rent out your existing home.
Perhaps you have already purchased your new home and haven’t yet sold your old one? Rental income would definitely help in this situation.
Who doesn’t need extra monthly cash flow? Right?
Just like anything in life, there is a right way and a wrong way to do things. Be careful not to fall into common traps like rushing the process or leasing your home to the wrong tenant.
Here are a few tips to have the process go smoothly:
1. Presentation is Everything
Your home is your castle – no doubt about it. Daily life is so demanding that you don’t always notice that you’ve been jamming paper grocery bags in that space between the refrigerator and cabinets… for two years.
Here is what has been happening: You have secretly been forgiving yourself for all these little unsightly things around your home because of work, kids, travel, etc. Unfortunately, potential tenants are not so forgiving.
Just like anyone who is wants to buy something, the tenant will immediately look for everything which is “wrong” with your property.
Many homeowners take this personally, but it’s important to remember to put yourself in the tenant’s situation – how would you react?
You need to make your home presentable for the widest array of personal tastes, otherwise you are limiting the amount of potential tenants – and rental income.
Remove All Clutter – Stuff it in the drawers or bury it in the backyard, just don’t have it in your home.
Clean Everything Until it Shines – Think about those home magazines; are the bathrooms and kitchens clean or dirty.
Buy Plants and Flowers – TIP: You really can’t go wrong with orchids; they seem to breathe new life into an old room.
Create a Sense of Openness – Arrange your furniture and outdoor areas with a sense of open space, especially in entry ways. Retail stores do this in all their entry ways (called “decompression space”) to allow customers to “take-it-all-in” first, before they buy.
Natural Light Works Wonders – I mean really… if you have a tenant who thrives in a really dark space – unless they’re developing old camera film – it’s probably not someone you want in your home.
Make All Repairs Now (while you still have the chance) – Yes, it’s time. That loose door knob, leaking toilet, crack in the tile, etc. is costing you money. Fix it now and if it’s broken again when the tenant moves out, then remove it from their security deposit.
2. Price Your Rental Right
Pricing is everything.
It is easy to look at comparable rentals in your area to get an idea of how to price your home. Just be sure not to fall into the trap of thinking “nothing compares to our home… it’s better than anything else in the neighborhood”.
Unfortunately, potential tenants have no emotional attachment to your home, so be prepared for some brutally honest opinions.
Remember that you have to see things from their perspective. What would you look for? What type of things would you point out about your home if it did not belong to you?
A huge value-add to add to a lease is for the landlord to offer to split the utilities with the tenant. Sometimes this can make a lease more desirable if you are having trouble getting a qualified tenant.
Remember, I said split the utilities – never offer to pay them in full, as this will open you up to a lot of problems of over-usage.
Splitting the utilities will require some extra paperwork at the end of the month (the tenant will need to email you the utility bills each month, however it’s a very attractive offering to most tenants and will allow you to keep your lease at a competitive price.
3. Build a Short List of Leads
The amount of resources available to landlords today is vast. Social media, online profiles, online background checks, etc. make it much easier to get a clearer picture of who you are thinking of having in your home.
As long as the information on your potential tenant is available to the public, don’t be afraid to use it. Facebook, LinkedIn, Instagram and Google Images can reveal a lot about someone and their lifestyle.
Remember: It’s not fair to judge someone based on their online profiles alone. However, if they allude to participating in illegal activity, or post a lot of photos about having house parties, etc. – well, this makes your decision a little bit easier.
4. Verify and Qualify Your Tenants
Some of the biggest mistakes I see with landlords qualifying tenants is that the landlord is way too busy to individually look up references and simply call the numbers provided on the rental application.
Don’t just call the numbers provided on the application!!
It’s not a common practice, but sometimes a potential tenant will give numbers on their application to “references” which are actually friends or family doing them a favor.
If a tenant lists a reference which is a previous employer or previous landlord/management company, ALWAYS look up the number on your own. This is just a safeguard which will get you more accurate information.
Honestly, I’m not a big fan of using third-party services to qualify your tenants. Call me old-fashioned, but I like to do my own research and actually pick up the phone
Here are some helpful resources to make your life easier:
1. Get Application – Try Tidyforms.com and search Rental Applications
2. Get Docs Signed – If you are managing multiple rentals and screening a lot of tenants, yet are still faxing or hand-signing documents. STOP. Look into using Docusign.
3. Manage Your Business – Search for management software which runs your entire rental business. Everything from screening, background checks to even collecting rents.
4. Advertise Your Rental – Always favor paid services (where the tenant has to pay to search listings) to advertise. In general, paid services provide more qualified tenants (in my experience).